Alternative Investments: Diversify and Customize your IRA
Building long-term wealth requires diversification.
Any good financial adviser will tell you not to put all your eggs in one basket, because if you do and prices tank, you could lose everything. This “golden rule” of investing is used when wealth managers select investments for traditional IRAs. They invest your money in a range of stocks and bonds to help mitigate your risk. But what happens when the stock market crashes? Despite diversifying in a multitude of Wall Street investments, you could still lose everything.
For decades, the elite have sought out alternative investments to hedge against the stock market, investing in everything from gold to real estate. Many of these alternative investments also have the potential to generate more revenue in a shorter period of time than stocks and bonds. However, investing in alternative options often requires more money than the average individual has in their bank accounts. But, unknown to many, IRAs can actually be used to invest in many of these alternative options.Charles Thorngren, CEO of Noble Gold, and Bill Humphrey, CEO of New Direction IRA, shed some light on this issue in the video clip below.
The security industry is trying to help protect people from risk by limiting their options, explains Humphrey. He continues by highlighting that not only are people educated when it comes to Wall Street and know what they want to invest in, but all investment – including Wall Street – comes with risks.
“Today’s investor is not the investor from the 80’s, it’s a completely different scenario and this is where it’s so important for you have options,” said Thorngren. He proceeds to explain a couple of the reasons why wealth managers don’t look to alternative investments when building your IRA: They’re trying to “protect you” from risk, or so they say. But, what it often boils down to is money: Wall Street doesn’t make money on many of the alternative investment options available to IRA account holders.
Another reason wealth managers often shy away from alternative investments is because of the time and effort required. When it comes to stocks and bonds, they can build portfolios that can be offered to several clients, but alternative investments are highly customized. There is no “auto pilot” option when managing these assets. Individuals have control and are much more involved in each decision. Further, the IRS has strict rules when it comes to IRA alternative investments, thus presenting a high level of risk for wealth managers who do not want to devote the time required to learn the ins and outs of IRA alternatives.If your traditional IRA doesn’t allow you to invest in alternatives, what can you do?
Unbeknownst to many, you can actually roll your traditional IRA to a self-directed IRA – giving you complete control of how you invest your IRA. You can customize your portfolio with alternative investments such as gold, real estate and cryptocurrency. These self-directed IRAs come with many tax advantages and allow your returns to compound tax-free.
Understanding your options when it comes to IRA’s can be a difficult feat. If you have questions about diversifying your IRA portfolio beyond stocks and bonds or about the longest standing investment option, gold, let our experienced, friendly team at Noble Gold help you.